EUR/USD rebound from the weekly low (1.1720) despite an growing support from European Central Bank (ECB) officials to pledge additional support to the Eurozone.
EURUSD could retrace its decline from the yearly high (1.2011) as it breaks above the monthly opening range, while the Relative Strength Index (RSI) breaks out of the downward trend in place since late July.
EUR/USD REBOUNDS AFTER FAILING TO TEST MONTHLY LOW
EUR/USD claws back declines from earlier in the month as the Euro outperforms versus its major peers. The pair failed to break through the monthly low (1.1696) undermines the downward trend as the ECB seems in no rush to change the path for monetary policy.
ECB board member Francois Villeroy de Galhau s points to the central bank relying on its current tools to support the Eurozone economy. However, he said that the Governing Council “will be ready to act further if needed.”
The dovish forward guidance is expected to stay as a V-shape recovery is as good as ruled out. However the ECB could stay on the side-lines at the next interest rate decision on October 29 given that the minutes from the September meeting reveals that the “PEPP (Pandemic Emergency Purchase Programme) envelope would likely have to be used in full to provide the necessary accommodation to offset the downward impact of the pandemic on the path of inflation.”
ECB could instead tweak its current tools as it was noted that “further cuts in policy rates and changes to the conditions of the TLTROs (Targeted Longer-Term Refinancing Operations) were also part of the toolkit for providing additional monetary policy accommodation, if necessary,” With few hints towards the use of non-standard measures the current market trend could hold.
traders have been net-short EUR/USD since mid-May.